Determinants of Production Factors in Guatemala, Honduras, and El Salvador: An Empirical Analysis of Digitalization, Innovation, and Financial Development (#1171)

Authors

Vásquez Martínez, Dulce Maria

Paredes Heller, Juan Jacobo

Abstract

This article analyzes whether innovation enablers, digitalization, R&D effort, financial deepening, and advanced human capital are associated with Total Factor Productivity (TFP) growth in Guatemala, Honduras, and El Salvador during 2000–2022. An annual panel is constructed using the Penn World Table (TFP is measured as a logarithmic annual change) and World Development Indicators (internet users, private credit, tertiary enrollment, and R&D where available). The base model is a country-fixed effects model with robust standard errors and robustness tests (lags and exclusion of pandemic years). The results are consistent with a significant negative association of private credit with TFP growth, suggesting potential problems in the allocation of financing. In contrast, digitalization, tertiary enrollment, and R&D show positive signs but less statistical robustness, consistent with an “adoption without absorption” dynamic. Policy implications for improving credit quality, strengthening university-industry linkages, and developing complementary organizational capacities are discussed.